What Is SIP Investing?

Today’s world is moving towards the new age and technology is growing very fast. With the help of modern technology, investment has become a necessity for everyone. Nowadays, everyone is worried about investment and the lack of time to invest it.

If you are also a person who wants to take care of his/her financial situation then the first thing that you have to think about is the saving.

Saving is the process of accumulating a certain amount of money and if you don’t save for your future then there is no use of starting a business or investing your money.

In order to make this process easier, you should consider the SIP Systematic Investment Plan.

SIP is short form for ‘systematic investment plan‘. It is one of the most common types of investing. It is popular in India and abroad. SIP means that you will invest in a particular scheme through regular small amounts. Let’s know about different types of SIP schemes.

This is a kind of investment plan which is used to accumulate the fixed amount of money over a particular period of time. This process is quite easy and simple to follow.

In this process, you don’t have to worry about the market condition and if you miss a single month then there will be no loss in your account.

SIPs are also known as monthly or systematic investment plan and it is recommended for the investor who wants to invest in equity or debt funds.

If you are a beginner then the first thing that you should keep in your mind is that this process is not meant for everyone.


There Are Two Types Of SIP’s:

  • Monthly SIP : You can invest as much as you want for a particular month and the amount will be deducted from your monthly income.
  •  Annual SIP : If you want to invest for a year, then you will get a certificate from the company saying that you have invested for a year.

Types of SIP Plans Based On Assets.

Here Are The Two Most Common Types Of SIP Assets Based On Investments:

Cash-Based SIP

This is one of the most common types of SIP assets. In this type of SIP, investors put money into various bank accounts. Here, the bank account will accumulate the money and later you will withdraw the money for your personal use.

Time-Based SIP

This is another common type of SIP asset. Investors put their money into the bank and wait for a pre-determined period to come. They can use the money at their discretion.

How SIP Works?

Here is how the SIP will work. After you deposit the amount you will get regular monthly payments. You can use the same amount or you can increase it.

Advantages Of SIP

Investing in SIP is one of the best ways to save money. It is one of the most secure and safest investment options. There is no limit on the number of times you can invest and you can also change the frequency of investment.

Here are some of the best benefits of investing in SIP:

  • Less hassle: In case of a monthly SIP, you will be able to invest as per your plan. But in case of annual SIP, you need to make the payment each year.
  •  Long-term investment: SIP is long term investment that will help you to gain a lot of money in the future. If you invest in a mutual fund, you will be able to earn a little bit of money but if you do it through SIP, you will earn a lot.
  • Saving money : You can invest your money in any mutual fund company as per your needs and preferences.
  •  Automatic reinvestment: As I mentioned earlier, you can invest as per your plan as monthly SIP.
  • Taxation: As SIP is a long term investment, you don’t have to pay any kind of tax on it.
  • Multiple withdrawals: You can withdraw as much as you want from your account, as SIP doesn’t require you to have a specific amount.
  • Low cost: In case of monthly SIP, you will pay a little bit more than the annual SIP. But it is low as compared to buying shares.
  • Minimum and maximum investments: You don’t have to invest the minimum or the maximum amount in SIP as you can start investing as low as Rs. 50 and you can end it as well.

Disadvantages Of SIP

There is no limit to the number of times you can invest and the minimum amount of Rs. 100 that you can invest in SIP is the best thing about it. If you think it is a good idea, then you can start your SIP with the minimum amount.

Yet, there are some disadvantages too:

  • Risk of being overinvested.
  • Uncertainty of return on investment.
  • Overlaps with other retirement accounts such as Individual Retirement Account.
  • You cannot withdraw the money from your account immediately.
  • Your SIP will be locked for a fixed time.

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